FTI Consulting calls LM fund meeting

The administrators of LM Investment Management, FTI Consulting, have called a meeting of members of the group’s $300 million mortgage fund, as rival fund manager Trilogy seeks to be appointed through legal action.

Two unit holders have applied to the Queensland Supreme Court for Trilogy to be appointed to run the LM First Mortgage Income Fund in place of FTI, which is acting as LM’s administrator.

Trilogy argues that these conflicts arise for the income fund and an associated currency fund and noted that unit holders have applied to the court for Trilogy to be appointed as an independent responsible entity.

However, FTI said it did not believe that court powers to appoint a temporary or replacement manager could, or should, be exercised.

FTI said that it was in the best interests of members that they have the opportunity to determine whether or not they wish to remove LM and appoint Trilogy.

FTI argued this was preferable to a court determined outcome where more than 99 per cent of investors, by value, would have no say in the outcome.

FTI said it expected that if it remains as manager, investors would recover capital distributions faster and in a greater amount. The administrator said that Trilogy did not hold the correct Corporations Act licence to manage the fund.

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Deutsche Bank has provided the fund with a secured loan facility since 2010. The facility stands at about $26.5 million and FTI warned that if Trilogy was appointed it would be an event of default under the facility, entitling the bank to appoint receivers to the fund.